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Targets switch as M&S profits fall
Marks & Spencer boss Marc Bolland has slashed his sales targets for the high street giant after unveiling its first fall in profits in three years.
The retailer, which in 2010 opened its giant northern distribution centre at the 1.1m sq ft Prologis Park on Rooley Lane, Bradford, saw like-for-like sales of general merchandise fall by 1.8 per cent in the last year in spite of efforts to attract customers with celebrity-laden advertising campaigns.
The decline was driven by a mixed performance in womenswear and home, with the latter hit by the company’s decision to exit the technology market.
Helped by a stronger performance in food, M&S saw underlying pre-tax profits drop one per cent to £705.9 million in the year to March 31, while total sales grew two per cent to £9.9 billion.
M&S, which is due to have a store in the stalled Westfield retail development in Bradford city centre, said it would slow down its store growth over the next two years due to the growth of its online market, extending space by three per cent this year and 2.5 per cent next year.
In November 2010, after joining M&S from Bradford-based Morrisons, Mr Bolland set a target to grow revenues by between £1.5 billion and £2.5 billion over three years, but as a result of the harsh economic climate has cut this target to between £1.1 billion and £1.7 billion.
He also said the group now expected to invest £200 million less in its UK stores over the remaining two years of its strategy review.
The profits dip was the first fall since 2009 and comes hand in hand with a flat dividend award for shareholders of 17p.
While the squeeze on household incomes in the UK, where M&S has 700 stores, has driven the weaker performance, some analysts also placed a failure to keep up with its rivals in clothing, such as Next and Primark, at the heart of its problems.
Mr Bolland could see his bonus threatened for the second successive year due to the profits fall, but is still likely to take home as much as £6 million for 2011.